Just when one thought the SEC has hit rock bottom in stupidity, corruption and porn-addiction terms, to paraphrase the beloved Dennis Gartman, it whips out a shovel and starts digging.

Today's case in point: a report by the agency that Mary Schapiro made into Wall Street's punching bag (and whose legacy her Morgan Stanley-friendly replacement is set to perpetuate) according to which "unexplained rapid price drops in single stocks have generally been triggered by human error, not nefarious trading activity or high-speed trading algorithms gone wild, an official at the U.S. Securities and Exchange Commission said on Tuesday."

"What we are seeing is the result of sloppiness, combined with a lack of checks and balances," Greg Berman [formerly of RiskMetrics] said at a Securities Industry and Financial Markets Association conference. "In this day and age, there should be no excuse for these types of mistakes, especially considering the significant negative impact that these events have on investor confidence."

Most rapid price spikes are caused by old fashioned human mistakes, such as "fat finger" errors, where a trader may accidentally add an extra zero to an order, or by portfolio managers accidentally requesting a large order be immediately executed rather than meted out in a managed flow, Berman said.

"Contrary to public speculation, these types of events do not seem to triggered by proprietary high-speed algorithms, by robots gone wild, or by excessive order cancellations."

Oh, so like Waddell and Reed was to blame for the flash crash, not the fact that some 70% of the tape is filled with empty quotes in which one algo tries to outsmart another algo, and instead of trading blast hollow bids and asks just to game the NBBO?

But just how did the SEC come up with this startling conclusion which flies in the fact of all the factual evidence we have presented over the past 3 years?

Berman heads up a new initiative at the SEC that analyzes market data using a platform launched in January called Market Information Data Analytics System, or MIDAS, which was developed by Red Bank, New Jersey-based automated trading firm Tradeworx.

MIDAS gives the SEC access to all orders posted on the national exchanges, including modifications, cancellations and trade executions of those orders, as well as all off-exchange executions, putting the regulator on even footing with the most sophisticated high-speed trading firms.

Traditionally when a problem in the market has needed to be investigated, the SEC has gone to the exchanges, the Financial Industry Regulatory Authority, and the firm that introduced the error, to diagnose the cause. But MIDAS allows the regulator to do its own assessment as well.

And once again, the conclusion:

The SEC has found that high-frequency trading tactics have not caused or amplified the mini flash crashes it has examined, Berman said.

This is Tradeworx:

So, to summarize, the SEC which admits it was clueless in analyzing the modern, fragmented market (yet which found definitively that the culprit for the May 2010 flash crash was Waddell and Reed, and nobody else, using what technology at the time, nobody knows), uses a platform developed by High Frequency Trading firm Tradeworx... to reach a conclusion that High Frequency Trading firms are innocent of every flash crash resulting from an HFT algo gone haywire...